Collaboration in Civic Spheres

Bellevue man, Kirkland firm charged with securities fraud

by Matt Rosenberg September 8th, 2011

SUMMARY: Attorneys for the U.S. Securities and Exchange Commission filed a legal complaint today in U.S. District Court in Seattle against Richard A. Finger, 32, of Bellevue, Wash. for defrauding investors in the Kirkland, Wash. securities trading firm he ran of about $4 million over a seven-month period in 2011, through a high-volume, high-risk trading scheme. SEC attorneys allege in the complaint that Finger’s investors, mainly family and friends, lost $1.9 million due to his “improper trading” and that he took another $2.1 million in commissions to help fund a lavish lifestyle – while falsifying account balances, underreporting commissions, and forging documentation to a suspicious trading partner. Federal criminal charges of wire fraud were also filed against Finger today, punishable by up to 20 years in prison. Finger’s attorneys say in a statement issued today to Public Data Ferret that he’s admitted deceiving customers, apologized to them and will reimburse them as best he can.

KEY LINK: “Securities and Exchange Commission v. Richard A. Finger Jr. and Black Diamond Securities LLC,” complaint filed in U.S. District Court, Seattle, September 8, 2011

KEY FINDINGS:

The SEC complaint filed in U.S. District Court today against Richard A. Finger, Jr. of Bellevue and his firm Black Diamond Securities LLC, of Kirkland, includes the following allegations.

  • Since February of 2011 Finger raised almost $5 million in funds from 25 investors in his firm Black Diamond Securities, LLC and “embarked on a high-frequency, high-risk options trading strategy that generated spectacular trading losses for his customers and huge commissions for himself.” The total dwindled by August to only about $500,000 as Finger lost $1.9 million for his clients, and took about $2.1 million in trading commissions while dramatically inflating the value in customer account statements and underreporting the actual commissions being charged.
  • About $1.1 million of the $2.1 million in commissions taken by Finger for the company were transferred to his own customer account and another $870,000 to his personal banking account. The SEC complaint states, “these profits helped finance Finger’s lavish lifestyle, which includes a $2 million home and luxury automobiles.” Many of the customers who were allegedly defrauded by Finger were his relatives and friends and had invested with him when he worked as registered dealer-broker at other firms between 2001 and 2010. Finger is 32 years old.
  • Doctored account statements issued by Black Diamond dramatically over-reported account balances. One customer’s June 2011 statement showed a balance of about $1.5 million when it was actually about $26,000; another’s July statement showed a $796,234,53 cash balance but it was really $62.00.
  • Around April and June of 2011, Black Diamond’s clearing broker, which made trades on the firm’s behalf, noticed major losses and high commissions in several customer accounts and asked for proof the customers knew and approved of the activity. Finger allegedly forged customer signatures on and “otherwise falsified” the required letters of documentation.
  • Finger has admitted his guilt to customers, the SEC alleges. “When customers began raising concerns about their accounts in mid- and late-August, Finger admitted he had deceived them.”
  • Finger and Black Diamond are charged by the SEC in federal court with violating the Securities Exchange Act. The SEC is seeking court permission to freeze remaining assets, preserve documents, and further uncover details of how the alleged frauds were engineered. The agency is also seeking repayment to clients, with interest, and civil monetary penalties.

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UPDATE, 4:58 p.m.: In a press release issued today, Finger’s attorneys confirm he has admitted deceiving customers, has apologized to them, and is working with the U.S. Attorney’s Office to resolve the charges against him and provide “as much restitution as he can to his victims.”

Reported vs. actual account balances for 18 selected clients of Black Diamond Securities LLC/Securities and Exchange Commission


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